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Everything that's going wrong for Facebook right now

Facebook makes privacy changes
Facebook makes privacy changes 10:13

As the CEO of the world's largest social network prepares to go before Congress, 

As fallout continues from Facebook's (FB) Cambridge Analytica scandal, Playboy and Will Ferrell have become the latest big names to delete their Facebook accounts. The platform is being sued by users, investors and advertisers in a series of events that has caused the company to shed $73 billion in value in the past weeks.

Here's a breakdown of the challenges facing Facebook.

1. Federal probe

The Federal Trade Commission has dinged Facebook in the past for being deceptive about users' privacy. The 2012 settlement was essentially a promise by Facebook to do better.

Now the FTC is looking into the matter, and the fine could be hefty. On Wall Street, the threat of an FTC fine is seen as the biggest threat to Facebook's bottom line. 

Heights Securities analyst Stefanie Miller, in a note, projected it could land between $1 billion to $2 billion. 

Facebook did not respond to a request for comment on the investigation, but it has previously said it "remain[s] strongly committed to protecting people's information."

Facebook makes changes to privacy features 02:32

2. Four state attorneys general investigate

Massachusetts Attorney General Maura Healey announced she was launching an investigation into Facebook and Cambridge Analytica the same day the story was reported. Attorneys general from New York, Connecticut and Mississippi have since joined.  

3. 37 AGs demand answers

Attorneys General from 37 states have written to CEO Mark Zuckerberg asking for detailed information on Facebook's privacy practices. Likely some of them are considering launching formal investigations as well. 

"Our top priority is determining whether Facebook violated their own 'Terms of Service' or data breach notification laws," said Pennsylvania AG Josh Shapiro, who is leading the coalition.

4. Cook County sues

Illinois' Cook County, which includes the city of Chicago, sued Facebook on Friday, claiming the platform broke Illinois anti-fraud laws when it violated users' privacy. 

5. Lawsuit over political ads

As regulators investigate, individuals are taking out their grievances in the courts. At least seven have filed lawsuits since last week, including three from users and more from investors and a fair-housing group.

Maryland resident Lauren Price filed a lawsuit last week claiming she saw political ads during the 2016 presidential campaign and that she was one of the 50 million users whose information was illegally obtained by Cambridge Analytica.

6. Lawsuit over Messenger

On Tuesday, three Facebook Messenger users filed a lawsuit in federal court in Northern California, claiming Facebook violated their privacy when it collected text and call information. The service has admitted that it kept logs of text messages and calls for some Android users who signed up to use Facebook Messenger as their texting service, but it maintains it did nothing untoward.

7. Leaked memo hints at "growth at all costs"

An internal Facebook memo added fuel to the outrage. In the 2016 note, first obtained by BuzzFeed, a senior Facebook executive seems to defend a "growth at all costs" strategy.

"We connect people," the memo said. "Maybe it costs a life by exposing someone to bullies. Maybe someone dies in a terrorist attack coordinated on our tools." 

It went on: "The ugly truth is that we believe in connecting people so deeply that anything that allows us to connect more people more often is *de facto* good. It is perhaps the only area where the metrics do tell the true story as far as we are concerned."

Zuckerberg said he "strongly" disagreed with the memo. So has its author, Andrew Bosworth, who said he wrote it to start a discussion.

8. Activist investors go to court

Zuckerberg likely to testify 02:22

A spate of Facebook investors have also joined the legal fray. Robert Casey and Fan Yuan sued the company last week for the monetary losses they incurred when its stock tanked. Both lawsuits are seeking class action status.

Another investor, Jeremiah Hallisey, filed a suit on behalf of Facebook against the company's management. It accuses Zuckerberg, Chief Operating Officer Sheryl Sandberg and the company's board of violating their fiduciary duty when they didn't prevent and didn't disclose the gathering of data from users' profiles.

9. Facebook stock plummets

"I expect lawsuits to come out of the woodwork," said Daniel Ives, chief strategy officer at GBH Insights, adding: "It's probably going to be a stock stuck in the mud in the next few months."

The company has lost $73 billion in value in the 10 days since the Cambridge Analytica story broke on March 17. Facebook's stock price stabilized on Monday, after the FTC confirmed its investigation, then started to climb up. Its Thursday closing value of $159.79 is still 17 percent below its peak last month.


10. Housing discrimination accusations

A lawsuit filed on Tuesday by fair-housing advocates claims that Facebook is breaking federal laws in permitting targeted ads that exclude certain groups.

The National Fair Housing Alliance and affiliated groups filed a lawsuit that seeks to change its advertising platform. They claim Facebook allows exclusions of people with disabilities and people with children, which is also illegal. The group said Facebook accepted 40 ads that excluded home seekers based on their gender and family status, the Associated Press reported.

11. Advertising scrutiny

The housing lawsuit is the latest in a series of criticisms about Facebook's advertising practices, stemming from the massive trove of user data that permits targeting ads to very particular groups. In 2016, ProPublica documented that the platform identified people with "affinity" for Hispanic or African-American topics, and allowed advertisers to post ads that wouldn't be seen by people in those groups. Excluding people based on ethnic identity is illegal for certain types of ads, like housing and jobs. Even though Facebook's "ethnic affinity" designation isn't the same as race -- which it doesn't collect -- the social platform stopped allowing that category for housing ads late last year. 

Facebook's platform has also come under fire for allowing companies to exclude workers over 40 from seeing job ads—another act that could be illegal. 

12. Users start to #DeleteFacebook

A small but vocal number of users have deleted their Facebook accounts, giving rise to the #DeleteFacebook movement. Actor Will Ferrell is the latest to join, describing his intention in a post on Tuesday.

"I can no longer, in good conscience, use the services of a company that allowed the spread of propaganda and directly aimed it at those most vulnerable," Ferrell wrote.

Cher, Elon Musk, Jim Carrey, Tea Leoni and Adam McKay have also deleted their accounts, as has Tesla (TSLA) CEO Elon Musk.

It's unclear whether the movement will have legs: breaking up with Facebook is hard, given how intertwined it is with the rest of our digital services. However, a concerted drop in its user base could be the gravest threat for the social media network. It's already struggling to retain younger users, with 2 million projected to leave Facebook this year according to a recent study from eMarketer.

Facebook still boasts 2 billion users—a quarter of the world's population. But when the company revealed in January that users had cut their time on the platform in response to changes in the news feed, investors sold off the stock, sinking its value by 5 percent.

13. Advertisers bail

A handful of advertisers have hit pause on their Facebook relationship. Sonos, the smart headphone maker, said it would halt ads for a week. Software company Mozilla and Germany's Commerzbank have also stopped ads on Facebook.

Still, the number of marketers leaving is minuscule compared the ones who aren't, and observers doubt there'll be an exodus.

"Facebook has proven itself to be a very powerful tool for creating community and for legitimate marketing activities," said Bart Lazar, a privacy attorney at Seyfarth Shaw.

14. Former users hide

With Facebook users (and former users) increasingly concerned about the data they reveal, some companies are making it easier for them to cloak their activities online.

Mozilla on Tuesday introduced the Facebook container extension, a tool that lets users isolate their Facebook activities from the rest of their web browsing. "This makes it harder for Facebook to track your activity on other websites via third-party cookies," the company said.

The Electronic Frontier Foundation, a digital privacy group, has seen a surge in the number of people downloading Privacy Badger, a  browser extension that blocks cookies and ads that track users. The extension has 2 million users to date, the group said. "Our data suggests that we had a spike in daily installs of Privacy Badger on Chrome since March 18 -- somewhere around a 50 percent increase to double the installs we had," said Karen Gullo, an analyst with the EFF. The Guardian first reported on Cambridge Analytica's data harvesting on March 17.

Large numbers of people opting out of Facebook (and other) tracking risks making its highly targeted ads less effective in the long term and could undermine the way the company makes "substantially all" of its money.

15. Facebook pulls back on data

As it tries to tame the backlash, Facebook has moved from earnest apologies to redesigning privacy tools to pulling back on its data collection. It has dropped partner categories, a tool that allowed third-party data brokers to offer their targeting directly on Facebook.

That's important because it's another tool for marketers to reach users they may not have relationships with, but the data itself can be problematic, eMarketer explains: "Many marketing tech vendors, and marketers in general, don't have direct relationships with users, so they rely on third-party data that's often obtained without user consent."

Cambridge Analytica whistleblower testifies 03:07

16. The "R" word

As Zuckerberg prepares to go before Congress, a growing number of activists and even some lawmakers have called for tighter regulation of tech companies and even a broad-based privacy law, like the one set to take effect in the EU on May 25.

Zuckerberg has indicated he would be open to the right kinds of regulations -- which presumably means regulations that don't hurt Facebook's business. While the current climate in Washington seems to preclude heavier rules, the breadth of Facebook's data-mining scandal and its involvement with alleged election interference by Russians means all options are still on the table.

"It's a scary, hand-holding time for Zuckerberg, Facebook and its investors," said Ives, chief strategy officer at GBH Insights. "For an industry that's never been regulated, to go from no regulation to heavy regulation, that's not a good scenario."

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